WellPoint versus the State of Maine

Forget Olympia Snowe, there’s other news in the north country

For weeks, the only health reform news from Maine has swirled around Sen. Olympia Snowe. Would the state’s senior senator support a public option? Would she support the Baucus blueprint? Would she support reform at all? The MSM has been downright atwitter about Snowe.

But there’s another story from Maine that the MSM has missed, avoided, or perhaps just overlooked. Anthem Blue Cross and Blue Shield, a subsidiary of insurance giant WellPoint, has sued Maine’s insurance superintendent, Mila Kofman, because this summer she ruled that the company was not entitled to the full rate increase it wanted. Anthem, which insures most of the state, had requested an 18.5 percent rate increase for the 12,000 policies it sold in the individual market—the place where people buy coverage when they don’t have it from an employer. Rates in this market are always high, and health restrictions always strict.

Kofman said no, and reduced the increase to 10.9 percent, calling the requested rate hike “excessive and unfairly discriminatory.” The reduction apparently left Anthem without a profit margin, and the insurer didn’t like it one bit. So it sued the state, contending that it needs at least a three percent profit margin for those individual market policies. The Maine Public Broadcasting Network reported that Anthem called the decision for a zero profit margin unfair and unprecedented.

Maine attorney general Janet Mills, who is handling the case for the insurance bureau, said that Anthem has averaged a 3.2 percent profit margin for its individual market policies over the nine years it has been selling in the state. Mills told the Network that going a year without a profit from those products will not drain the company.

In court papers, Anthem said it had lost $3.7 million on individual insurance products over the past five years, but the AG’s office said that over the last two years the company made $5.4 million from consumers who bought those policies. The AG broke down what the big number meant for policyholders. They would have paid $12 million more in annual premiums for the same benefits.

What were they paying and what were they getting? The AG said in 2008 policyholders paid, on average, about $6,000 in premiums, and had to satisfy an average deductible of $7,250—meaning that they would have paid more than $13,000 out-of-pocket before their policies paid a dime.

The Anthem story circulated around the blogosphere this week, and was picked up by MSNBC’s Ed Schultz. A big insurance company playing hardball with a state insurance commissioner who’s trying to keep rate increases under control made an interesting story that the MSM might want to follow.

The Maine case may be a harbinger of what’s to come in the new insurance order. According to the president himself, insurance market reform has been the goal of reform all along. But as Campaign Desk has repeatedly noted, this industry has been regulated before by the very insurance departments like the one that Kofman heads.

Too many times the companies have found a way around the rules, and they’ve never been shy about using the courts when they dislike something a hard-hitting regulator has done. How this case is decided could reveal much about whether insurance market reform will actually help the public or whether it will be business as usual. For now, it should be kept in the tickler file of everyone who will continue to follow the story.

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Trudy Lieberman is a longtime contributing editor to the Columbia Journalism Review. She is the lead writer for The Second Opinion, CJR's healthcare desk, which is part of our United States Project on the coverage of politics and policy. She also blogs for Health News Review. Follow her on Twitter @Trudy_Lieberman.

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